Purpose of Regional Aid?
Regional state aid aims at promoting the development of disadvantaged regions in Europe by supporting private productive investment or, in limited cases, by providing operating aid. The regional aid guidelines (RAG) set the rules under which Member States (MS) can grant state aid to support regional economic development. They also set out the rules for drawing up regional aid maps that define in which areas companies can receive regional state aid and at what intensity. The aim is a stronger overall single market, with all European regions able to compete and take part.
Where can regional aid be offered?
This aid is largely aimed at providing support to Small and Medium sized Enterprises (SMEs) in the form of financial incentives for businesses to invest in marginal locations so that jobs are created in these disadvantaged areas, and local GDP increased over the long term.
The guidelines also set the rules for selecting the areas in which this support is available, known as ‘Assisted Areas’ in the UK. The criterion for selection of an Area is based upon the Average Gross Domestic Product per Capita across all EU member States.
- Areas with less than 75% of the average EU GDP per capita are considered most disadvantaged, and are automatically designated as 107(3)a areas, or ‘A areas’, named after the EU Treaty article which permits enhanced aid.
- Areas with long-standing or permanent difficulties, such low population densities, transition from former ‘A region’ status, or island geography are also automatically selected for the sparsely populated ‘C area’ status.
- Member states are then allocated a population envelope which they can use to cover other ‘C areas’ which are disadvantaged compared to the national average – either lower GDP or higher unemployment.
As the relative picture of disadvantage changes across the EU, so does the logic for designating some areas and not others.
For example, the EU expansion to the East in 2004 and 2007 considerably lowered the average GDP levels. These new EU countries were considered to be not as economically advanced as older EU member states. Many areas which used to be relatively disadvantaged are now, with the shift of the average, considered to be relatively economically advantaged.
For the 2014-20 map, Scotland is able to cover approximately 41% of its population through the selected Assisted Areas. these are targeted on the areas which need the development support the most; but where it is also realistic to expect businesses to be interested in investing.
The UK assisted areas map outlines the assisted areas for Scotland. No location in Scotland falls under an ‘A’ area. The Western Isles and large parts of the highlands and Islands are defined as sparsely populated c areas, and several other parts of rural and urban Scotland fall under other c area status.
How much aid can be offered in Scotland:
The amount of aid which can be offered depends on both the size of company and the type of Assisted Area. In Scotland, the following rates apply:
Table 1: Regional aid intensities by location and beneficiary size
Size of beneficiary
Sparsely populated C areas
Other C Areas
This support is very actively used in Scotland. For example, organisations applied for support from Scottish Enterprise under their Regional Selective Assistance scheme. This scheme had an annual spend of £29.78m in 2013. This can be broken down to 118 offers of grants being awarded to both SME’s and large enterprises. With the help of this scheme 4,766 Scottish Jobs were created or safeguarded.
Under the new guidelines, support for similar activities can still be given under Scottish Enterprise scheme – ‘SE Regional and SME investment aid Scheme’. However, aid is much more restricted to large enterprises, who may only benefit if the activity is in favour of new economic activity in an area or a significant diversification of activity, and does not involve moving a similar activity from another area of the European Economic Area.
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